If the Trump administration follows through on its threats, it could mean the loss of hundreds of millions of dollars in funding from the United States (US) that goes to education, health care and food aid for Palestinian refugees via the United Nations Relief Works Agency for Palestinian Refugees (UNRWA).

In a pair of bellicose posts on Twitter, Trump wrote, ‘We pay the Palestinians HUNDRED OF MILLIONS OF DOLLARS a year and get no appreciation or respect. They don’t even want to negotiate a long overdue peace treaty with Israel. We have taken Jerusalem, the toughest part of the negotiation, off the table, but Israel, for that, would have had to pay more. But with the Palestinians no longer willing to talk peace, why should we make any of these massive future payments to them?’

Trump did not specify which US-funded programmes might be cut. But when asked about future funding for UNRWA, US Ambassador to the United Nations Nikki Haley told reporters, “The president has basically said he doesn’t want to give any additional funding … until the Palestinians agree to come back to the negotiating table.”

According to the Axios news site, a payment of $125 million that the US was expected to send to UNRWA by 1 January 2018 has not yet been released. The site also reported that a State Department official said deliberations are ongoing as to what to do about the funds.

The US is UNRWA’s biggest donor. In 2016, it provided $368 million, about one third of the agency’s $1.1 billion budget, according to figures posted by UNRWA. The second largest donor, the European Union, gave less than half as much, about $160 million. The US also provides aid to the PA – primarily for security – and for development projects via the US Agency for International Development. Total US aid to the West Bank and Gaza Strip averaged about $400 million a year between 2008 and 2016, according to a December 2016 US Congressional Research Service report, while US contributions to UNRWA averaged $250 million since 2007.

Israel has long had a contentious relationship with UNRWA because it supports the ‘‘right of return’ for refugees who fled their homes in Palestine. Israel considers that concept to be an existential threat.

Israeli Prime Minister Benjamin Netanyahu said at a cabinet meeting following Trump’s threats to cut funding that continuing to treat the descendants of Palestinians who fled as refugees generation after generation is “absurdity”.

“UNRWA is an organization that perpetuates the problem of the Palestinian refugees,” he said. “It also perpetuates the narrative of the so-called ‘right of return’ with the aim of eliminating the State of Israel, and therefore UNRWA must disappear.”

In spite of the US’ substantial financial leverage, after the widespread outrage and protests in Palestine and throughout the Arab world in the wake of Trump’s decision to recognize Jerusalem as the capital of Israel, it would be politically untenable for Palestinian officials to take part in a US-brokered peace process.

A Palestinian teacher gives a class during a protest by children and teachers against the reduction of educational programs given by UNRWA at the Deheisheh refugee camp, near the West Bank city of Bethlehem, on August 30, 2015. Photo AFP

PA President Mahmoud Abbas said in December 2017 at a meeting of the Organization of Islamic Cooperation member states, “It will be unacceptable for [the US] to have a role in the political process any longer since it is biased in favour of Israel.”

Palestinian leaders reacted with defiance to Trump’s threats, with a spokesman for Abbas saying, “Jerusalem is the eternal capital of the State of Palestine, and it is not for sale for gold or billions.” Meanwhile, Palestinian Liberation Organization representative Hanan Ashrawi said in a statement on Twitter that Trump’s decision on Jerusalem had ‘singlehandedly destroyed the very foundations of peace’. ‘We will not be blackmailed,’ Ashrawi wrote. ‘President Trump has sabotaged our search for peace, freedom and justice. Now he dares to blame the Palestinians for the consequences of his own irresponsible actions!’

The Israeli leadership has sent mixed signals about the proposed UNRWA cuts. According to Israeli news reports, Israel’s Foreign Ministry said in an internal report that cutting funding could ‘lead to catastrophe, especially in Gaza’ and would put more burden on Israel, which would have to deal with the fallout of the humanitarian crisis. Officials with the Israeli Army also believe cutting the budget could worsen the security situation, the report said.

Netanyahu said publically that UNRWA’s funding should gradually be taken away and transferred to the United Nations High Commissioner for Refugees to support “real refugees, rather than fictitious refugees”.

It remains to be seen how serious the Trump administration’s threats are. However, a withdrawal of aid would undoubtedly have a major effect on UNRWA, which is already on shaky financial ground.

The agency was formed in 1949 to provide services to the more than 700,000 Palestinians displaced as a result of the Arab-Israeli War. Initially envisioned as a temporary programme, its mandate has been extended again and again in the absence of a political solution for Palestine, and it now serves several generations of the original refugees’ descendants as well.

Today, it provides services including schooling, healthcare and basic food aid to about 5 million registered Palestinian refugees in the West Bank, Gaza, Jordan, Syria and Lebanon.

Yet the agency has struggled with its funding. In recent years, it has run substantial deficits, ending 2015 with a $128 million shortfall and 2016 with a $48 million shortfall, according to financial statements. In 2015, it proposed postponing the start of the school year for some half a million Palestinian students across the region due to budgetary constraints.

In the end, after donors provided additional emergency funding, the schools started on time, but as expenses have increased while revenues have remained stagnant, aid has been spread increasingly thin. The situation has been exacerbated by the war in Syria. According to UNRWA, up to 280,000 Palestinian refugees are internally displaced in Syria and another 120,000 have fled to neighbouring countries and Europe.

The situation of Palestinian refugees in Syria before the war had been relatively good, particularly compared to conditions in Lebanon, where many have since taken refuge. Although not granted citizenship, Palestinians in Syria had the same rights to work, education and social services as Syrian citizens. In Lebanon, on the other hand, Palestinians are restricted from working in many skilled professions and from owning property.

Also in Lebanon, where Palestinians have protested against UNRWA aid cuts in recent years, including reductions in housing subsidies, teaching staff in schools and healthcare assistance, and where Palestinian camps have sometimes served as a recruiting ground for extremist groups, the loss of US aid and additional funding cuts would likely further destabilize the political situation.

In Palestine, particularly in Gaza, where the movement of people and goods is severely restricted under a decade-long Israeli blockade, aid cuts could have a devastating impact. Eighty per cent of the population is dependent on international assistance, and unemployment stands at more than 40 per cent, according to UNRWA.

The US threats have put the PA in an impossible position. The withdrawal of aid would devastate already vulnerable populations and likely lead to more unrest both in Palestine and outside, while participation in a US-led peace process would destroy much of its remaining legitimacy. Whatever the outcome of this political game, the Palestinians will again be the ones to pay the price.